Valuations in many sectors will be justified by the earnings growth outlook, says Sunil Subramaniam, chief executive officer, Sundaram Mutual. In an interview with Ashley Coutinho, he says the drop in commodity prices last year has not yet reflected in company earnings. Edited excerpts:
Do you think the market is overvalued?
We do not believe the market is overvalued, given the stage at which the economy is. While the valuations are higher than long-term averages, several sectors, such as capital goods, are still not fully reflecting the growth potential. The market is still discounting 2016-17 earnings, but as the October earnings come through the focus will shift to 2017-18 earnings. One more year of earnings growth will be factored in, so you will see valuations in many sectors will be justified.
